They nestle everywhere, from posh city centres to dilapidated estates, high streets to villages. Pubs are closing down; churches are struggling to fill pews; local railway stations have been turned into housing. But around 12,000 post offices are still there, open for business, fighting to keep alive.

Labour now wants to put the future of post offices at, or near, the centre of its election manifesto. As the Guardian revealed on Friday, they would be linked together by a new People's Bank, giving them a key role in communities around Britain. Not only is it a great idea, but it ought to give a pointer to the future of centre-left politics that takes us beyond the grim argument about public spending cuts.

The background is familiar: a much-loved national institution is in decline because, it seems, the world is moving on. A big review by the business department in 2008 resulted in 2,400 closures. Around a third of post offices have seen revenues fall, and it has become all too easy for developers to move in when leases end, so the buildings are snapped up for housing or offices. It has been a story of death by a thousand cuts.

In the past there has been an almost fatalistic drumbeat under the headlines – about more people using online services, fewer people wanting to collect documents or pensions in person, and a general sense that post offices were musty places that were dying out.

After the years of bubble, hubris and boom, this is a time for reassessment. Too much was thrown out too eagerly. Old centres were demolished. Privatisations were pushed by consultants and financiers who lined their own pockets and left us with private companies that haven't been astonishing success stories (British Airways and Network Rail spring to mind). Glib tear-it-up-and-start-again radicalism is at last out of fashion.

This takes us directly to the post offices. They are a fantastic national asset, which matter most to the people at the bottom of the pile, the ones Labour should be most concerned about. This is about bricks and mortar, real places and real people in real communities.

Even in its attenuated condition, the post office network is bigger than all the banks and building societies put together (and they are still closing down across the country). There is a modest public subsidy of about £150m a year, but this should be thought of as payment for an essential part of the fabric of daily life – without it, according to the government, two-thirds of post offices would disappear. It is time, in short, to come up with a shrewder, better system of valuation, one that acknowledges the value of traditional, easy-to-find, reassuring institutions that make being British just that little bit more pleasant.

When Victorian reformers invested in public parks and libraries, as well as enshrining the post office as a local hub, they were being hard-headed, not fuddy-duddy.

That's half the story. The other half is the near-collapse of the banking system, again caused by computerised geniuses who had lost touch with the real world. Whatever happens to banks in the longer term, hardly anyone disagrees that there needs to be a clear division between the casino-capitalism high-risk investment game and the humble current account, savings and mortgages banking that most of us actually use.

The banks haven't changed their spots. They protest at new levies, limits to bonuses or any imposed change to their structures. The government has limited leverage because ministers are all too aware of how much the rest of us depend on the familiar high-street end of the banking system. So a People's Bank – offering current and savings accounts, help with financial planning, and a way for credit unions to reach individuals – would provide a real alternative. It would bring the million or so "unbanked" people into the financial system with weekly budgeting accounts. Yes, it would boost the incomes of post offices; but it would also be a huge and populist reform of the banking system.

Doing this, as Ed Miliband proposes for the forthcoming Labour manifesto, would mean radical rethinking of the future of individual post office sites, because attempts by the Royal Mail to leaseback sorting offices, never mind post offices, are going ahead all the time. It would provoke protests from banks. Most important, it would mean, in a time of financial stringency, forgoing the quick-hit savings from closures and choked-off subsidies.

It costs, but it benefits more. These are strange and bewildering times for the centre-left. The immediate agenda of spending restraint and tax increases leaves Labour struggling to find an optimistic road ahead. But here is a project that not only makes sense, but which can be funded by a big switch to a new kind of banking, and then of small business support.

It comes down to trust. For too long we have been sold a line. We shouldn't place our trust in anything publicly owned or run – rotten nationalised services, rotten institutions, rotten politicians. This is deadly for any progressive politics, of course, since without public institutions there is none.

But it is also a twisted view of how most people live. In ill-health they rely on revamped publicly owned hospitals. They wait for the postie, not the private courier, to deliver their letters. Thinking of the environment, they acknowledge the importance of public transport – think of the cross-party enthusiasm for new high-speed trains, and the return of some trams to city centres. And they welcome the physical presence of community support officers to make public spaces feel more secure.

Yes, the online, digital world is exciting and new. Yes, many well-off urbanites live an apparently privatised existence, with sophisticated banking arrangements and so forth. But they are a minority whose airy, globalised world-view has been given too much attention by the political classes.

It's time for a Labour version of "back to basics", returning to the real lives of the majority of people, and the value of traditional, physical institutions for them. Ed Miliband, it seems, has got this message, with his determination to rebalance the power relationships between individuals and institutions. The boom was a collective fantasy, with fantasy money being made, and self-appointed magicians promising virtual paradise. We know better now. It is time to build a different political agenda; and the humble post office is a very good place to start.